Brent: Extended Hormuz closure and $200/bbl stress case – Societe Generale

Societe Generale analysts examine a low‑probability but severe scenario where the Strait of Hormuz stays shut through 2026, forcing Brent toward and potentially above $200/bbl to trigger sufficient demand destruction. They highlight deep inventory draws, a global recession, and eventual price relief into 2027 as supply normalises and stocks rebuild from critically low levels.

Prolonged disruption pushes Brent to extremes

"In a prolonged disruption scenario, the Strait of Hormuz remains shut through end‑2026, deepening the global downturn as persistent supply losses, infrastructure damage, and intermittent outages keep markets under strain. Inventories continue to decline despite increased SPR releases (towards ~3 mb/d), while demand contracts sharply under high prices and policy constraints."

"Even with demand falling by around 7–8 mb/d in H2, continued stock draws push Brent towards $200/bbl and higher, leaving the market tight and exposed to further shocks. While demand destruction gradually reduces the deficit, inventories remain under pressure."

"Despite this, ongoing inventory depletion—reaching around 7.1 billion barrels by September—continues to push prices higher, with Brent approaching $200/bbl and potentially exceeding that level by year-end as stocks fall further to around 6.95 billion barrels."

"On a monthly trajectory through 2026, this framework points to a significantly elevated price environment, with the annual average settling around $148/bbl. The delayed reopening of the Strait—only occurring at the very end of 2026—prolongs the period of tightness and keeps prices structurally elevated into early 2027."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)